It is often reported in the press that the UK will not be able to arrange a new trade deal with the EU without accepting the free movement of labor.

Why is this the case: What do other countries gain if their citizens come to the UK? Is it just ideology of an open Europe, and fairness that people should be able to live and work where they choose that is driving, or is there also an economic argument?

The cynic in me says that it's mainly because it creates an outflow of money from one of the organisation's developed countries to one of the LDCs via moneys being repatriated, some £11Bn per annum; ifad.org/topic/overview/tags/remittances
– ValorumJun 28 '16 at 16:03

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You seem to be to young to remember real borders in Europe.
– Martin SchröderJun 28 '16 at 22:31

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@Valorum Some money does probably get repatriated to the poorer EU countries like Bulgaria or Romania but apart from that, it's difficult to see the link with the EU freedom of movement. The link and figure you quote is about developing countries.
– RelaxedJul 1 '16 at 9:52

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@Valorum there is no need of an EU for these kinds of movements. In the sixties and seventies Spanish emigration was rampart, and Chinese has always been. And one of the most outspoken defendents of free movement of people is Angela Merkel from Germany, which is not a significant source of emigration. TLDR; there is something more to it.
– SJuan76Jul 1 '16 at 10:30

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@Valorum One commenter below speculates that the exact opposite is the case: That free movement drains people (and, implicitly, young, educated people) from the country and create serious problems there (shrinking population create problems for public services too, incidentally). I know that many people came from Poland to the UK starting in 2004 but was it really a “huge” boost and are they really sending money home as opposed to living the best live they could? That's certainly the case for developing countries and that's what your link is about but I still doubt it is the case for Poland.
– RelaxedJul 1 '16 at 11:33

5 Answers
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Put simply: It's one of the cornerstones of the “internal market” (the current EU official term for what has also been called the “unique” or “single” market). The theory is that freedom of movement for goods, capital, services and persons ensure the most efficient allocation of resources and convergence between EU economies. Many people seem to imagine it's a detail, something that could easily be extirpated from the rest of EU rules or something other countries forced the UK to accept for unfathomable reasons. It's not, it's an integral part of a coherent package and something the UK was originally very keen on.

Similarly, you can't pick and choose between apparently silly regulations like those on the contents of pillows and whatnot, everybody has to abide by the same rules to allow products to be sold across the EU without having to deal with a separate standard on safety, quality, etc. for each country. That's the reason why Norway (which is in the EEA) and Switzerland (which rejected even that) still have to implement most of these rules anyway (with one big exception: agriculture). There is no way around it without seriously endangering the whole construction (which might nonetheless happen, I am not trying to predict where the negotiations will lead).

The long-term objective is that EU economies should reach a level of integration such that for each economic decision (hiring an employee, choosing an employer or supplier, buying a product, etc.), you could transparently make a transaction with a business or person elsewhere in the EU as if it was a business or person in your own country, without worrying about extra paperwork, delays, etc.

That's the theoretical and economical reason why freedom of movement for workers was an integral part of the project from the start (back in the days of the European Coal and Steel Community and then in the 1959 Treaty of Rome), long before the creation of the EU and the mostly failed attempts at extending its remit to things like defense or border security or the catastrophic experiment that is the euro.

Therefore, the original argument for all this is primarily about economics, as you suspected. Historically, the freedom of movement thus only covered workers. The Maastricht treaty added some limited rights for economically non-active people (e.g. retirees, under the condition that they have sufficient income) and case law extended them (e.g. based on the notion that living with your family should be a basic right) but freedom of movement for workers is still the most thorough (and freedom of movement is only about EU citizens; the rules about refugees and the border-free Schengen area fall under an entirely separate set of regulations).

The short-term political considerations are slightly different but also go in the same direction. For if Britain is able to extract significant concessions and gets to choose which rules it will continue to implement, why deny that to other countries?
Freedom of movement for persons is a particular focal point in the UK debate at the moment (but also implicitly free movement of goods, for that's what all the seemingly absurd rules about pillows, vacuum cleaners, bananas, cucumbers and the rest are about) but elsewhere it will be something else (including the freedom of movement for services – cf. the clichéed “Polish plumber” or the complaints about lorry drivers from Central and Eastern Europe – or capital – cf. discussion about tax deals with large companies in Luxembourg or Ireland).

The risk is that we would soon end up with a fragmented market where each country adds friction and bureaucratic requirements in different areas based on its current and changing priorities, essentially rolling back the EU single market. The EU would then revert to the kind of free(ish) trade that currently prevails between countries elsewhere in the world.

That would not necessarily be a catastrophe but would clearly mark the end of the single market and the EU as we know it so it's easy to see why countries, parties and politicians who are currently part of it and find it beneficial would not want to go down that road. The single market and freedom of movement (for persons and for other things) are very different in that respect from things like the euro or the Schengen area, which the UK could easily “opt-out” from in the past. Those are merely side-projects, not really tied in a very deep way to the existence of the EU itself.

Incidentally, it's interesting to note that the UK has always been a strong supporter of the single market idea against French push for centralised policy making à la Common Agricultural Policy. The European Union the British voters just rejected therefore owes much more to their country's than to the French or German vision of what it should be. Freedom of movement for persons is a case in point: The UK was very much in favour of enlargement and almost the only country not to put any restrictions on freedom of movement for citizens of the new member states during the 2004-2011 transitory period (although this was at least in part because it did not expect that many people to actually show up).

Comments are not for extended discussion; this conversation has been moved to chat.
– Sam I am♦Jul 1 '16 at 0:02

"catastrophic experiment that is the euro"... depends who you ask. If you ask the Germans or the Greeks. And the euro was introduced to fix a big problem with the single market: competitive devaluation. If we go by Stiglitz, the euro doesn't go far enough. The fix for the euro is a transfer union (according to S.) like the US has.
– FizzJul 9 at 22:19

@Fizz It's the other side of the same coin. But the point still stands, without that, the euro is a failure, and not only for the Greeks but also for the Italians, Spanish, Finns (even if they don't necessarily see it that way...), Basically every other country than Germany stands to suffer from it at some point and Germany might very well feel some second-order economical or political effects too, all the way to a potential unraveling of the EU... And it's not true there was a big problem to be solved in the single market, the euro was primarily a political project.
– RelaxedJul 10 at 7:40

There's an element of social integration in the free movement of people. I suspect it may help to keep wars off the table which is, I suppose, a financial consideration.

To use an example, there has been much recent discussion on the plausibility of Turkey becoming an EU member state. In order to do so, it must meet the Copenhagen criteria:

stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities;

a functioning market economy and the ability to cope with competitive pressure and market forces within the EU;

ability to take on the obligations of membership, including the capacity to effectively implement the rules, standards and policies
that make up the body of EU law (the 'acquis'), and adherence to the
aims of political, economic and monetary union.

If it did decide to become a member state and achieved these criteria, the changes to its internal social policies would likely be relatively recent and potentially controversial. The free movement of Turkish workers to the UK (or other long standing member states) or vice versa would, in theory, help to move cultural concepts between nations more quickly. Immigrants bring their own culture with them, and convey the ideals of their host country in the other direction.

Tighter social integration leads to reduced tension, leads to less war.

I think Relaxed gave a very good answer. Let me just add here why what Britain ideally wants, i.e. being part of the EU free trade zone without free movement of people would not be acceptable to the EU on purely pragmatic grounds, if we assume that the EU were to be open about changing the rules. First, as already mentioned in the discussion thread below Relaxed's answer, there is link between free movement of people and goods. But suppose that we would allow Britain to just impose its own rules on immigration as it sees fit. Then what is likely to happen is that Britain would restrict the movement of Eastern Europeans into Britain. The whole point of the Leave campaign was to restrict EU immigration, particularly Eastern Europeans.

However, Eastern European EU members like Poland would find that unacceptable. A deal like that would mean a de-facto EU membership for Britain which violates the terms they signed up to the EU under, i.e. that some time after they became EU members their population would fall under the free movement of people rule. Poland would obviously not want to become a de-facto second class EU member, so they would veto any proposals along these lines.

Let's be honnest all countries which were behind the Iron curtain are de facto 2nd class members, and some which weren't also are, such as Greece.
– BregaladJul 1 '16 at 19:06

@Bregalad, what does your claim exactly mean? Which "de facto"? Does your comment mean something else than some kind of racism held by a geographically challenged person? The EU laws make it spectacularly clear that these countries are qualitatively equal members to others. Do you propose these laws and principles should be circumvented in some way? How do you exactly want to achieve such a thing? Poland and others will surely be heard. I hope that Poland will understand that its excessive export of people brings more negatives than positives and will agree with reduced movement of people.
– Luboš MotlJul 5 '16 at 9:50

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What I mean, is do a job in Poland, Czech republic, Romania, or whathever state that was behind the iron curtain and see how much it's paid. Then repeat the process in a country that was west of the iron curtain. Have your conclusion. This even works awfully well within Germany. I hate this situation just as much as you do - believe me I absolutely love and am fascinated by central Europe (if you still don't belive me look at my question set). Nevertheless, sadly, this is the case.
– BregaladJul 6 '16 at 19:48

Most Western European politicians only care about it for ideological reasons – free movement of the Europeans is great. However, for less wealthy EU countries, the jobs in the U.K. make a genuine difference.

The stereotypical Polish plumber earns much more money in the U.K. than he earns at home. Some of this money is being brought or sent to his relatives in Poland and this plumber or at least his relatives are voters in Poland, too. That's the simple reason why the Polish government (and a few others) naturally defend their citizens in these contexts, too. The other reason is that some of this money that gets back to Poland is spent or invested in Poland as well so it contributes to the Polish economy.

However, this outflow has negatives, too. The Polish economy is losing some mostly skillful workers. That reduces the pool for the companies in Poland. I believe that when all the arguments are compared, it is a completely neutral thing for "all of Poland" whether the U.K. decides that it wants to keep the free movement or not.

Another difference is that if the Poles became illegal, it would be trivial for the U.K. to defend their job market from the Poles, even without a wall.
– Luboš MotlJun 28 '16 at 18:32

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Another difference is that there is nobody in the UK who willing or able to replace that plumber.
– gnasher729Jun 28 '16 at 19:49

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@Bregalad Indeed and the beauty of that fact is that it's a problem that has very little to do with the EU and that the UK could easily solve on its own (read: by increasing the minimum wage), reducing the number of Polish workers and improving British workers' income in one fell swoop without explicitly putting any restrictions on immigration. That confusion is the main problem behind all this.
– RelaxedJul 4 '16 at 21:31

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@LubošMotl You can keep inventing new colourful ways to derides EU bureaucrats, it really doesn't matter, it's the UK that wants access the single market. Just this morning I turn on the radio (BBC) and within 10 min that's what the guests were talking about... Again, that's a simple fact and a huge problem for the UK (but not for the EU, which does not need to negotiate anything and would be OK with a clean break).
– RelaxedJul 6 '16 at 8:51

Besides the founding economics considerations, it has become particularly important in the eurozone (according to an article from the Centre for European Reform), as a compensatory mechanism for inequality (since there's no transfer union in the EU):

In the eurozone, there is an additional aspect to
consider. Since euro countries have given up the
ability to adjust their interest rates or their exchange
rate, which both serve as tools to absorb the ups and
downs of the business cycle, they need other ways
to adjust to changes in the strength of economic
activity. One mechanism is to allow workers in
economically struggling regions and countries to move
to economically stronger ones. How much labour
mobility really helps the home country in an economic
downturn is controversial.
But being able to move and
escape long spells of unemployment certainly helps
individual workers.

There's also the pragmatic fact that it has widespread popular support in most continental EU (perhaps as a result that most are in the eurozone):

Continental Europeans are very attached to the single
market, imperfect as it is. The latest Eurobarometer poll
shows that 56 per cent of Europeans think that the free
movement of people, goods and services is the best thing
the EU has to offer (peace comes second, at 55 per cent).
And a whopping 79 per cent of EU citizens support free
movement of persons within the EU.

It's hard to think of some other policy that has nearly 80% support in the EU. (Of stuff asked about in that Eurobarometer, it was certainly the most favorably viewed.) So that's one pragmatic reason Continental politicians don't see it as negotiable. Below is the breakdown by country:

What's somewhat interesting is that if the question is phrased as "immigration of people from other EU Member States" (pretty ambiguous if you ask me: immigration of EU citizens or of Syrian refugees already in the EU, etc.) ... support is lower by some 18 points:

(The approval for non-EU immigration is much, much worse; only 37% approve of that overall.)

And there is an exception allowed to free movement, but it's extremely small: Liechtenstein (an EEA member) being allowed to impose quotas. On the other hand, even partial access to the single/internal market is predicated on the free movement of persons, as in the case of the Swiss:

only Liechtenstein
is allowed to impose restrictions on the free movement of
EU/EEA citizens (in the form of quotas) but only because it
is a tiny country in which over a third of the population is
already foreign-born. [...]

Even the Swiss, who have only partial access to the
single market, have to abide by free movement rules. In
2014, the Swiss voted in a referendum to impose quotas
on EU migration, but Brussels has since made it clear
that it would not accept a quota system. The EU has
Switzerland over a barrel: the many bilateral agreements
regulating EU-Swiss economic relations are tied together
by a ‘guillotine clause’, so that the EU could cease all
other agreements if Switzerland refused to accept free
movement of people.

And since it's sufficiently related, there's a nice NIESR article attempting to visually represent the trade-off between level of market access, payments and free movement of people in various association agreements the EU has:

Figure 1 [above] is a visual representation of the trade-off for a handful of relationships between the EU and non-EU countries where the vertices of the triangle correspond to full market access, complete freedom of movement of people and size of the financial contribution (as a percentage of Gross National Income). The largest triangle in black is the situation that the UK currently is in as a member state of the EU: the UK has full access to the EU market in goods and services, allows EU citizens to move freely in and out of the UK, and contributes about 0.5% of GNI to the EU budget, net of what it receives. Norway opted to join the European Economic Area (EEA) to have close to full access to the single market, both in goods and services. The dashed red triangle shows that, to be accepted as a member of the EEA, Norway had to agree to significant financial contributions (“Norway Grants”, amounting to 0.14% of GNI) and freedom of movement of persons. Switzerland’s bilateral agreements with the EU means that it allows freedom of movement of persons, makes a very small net budgetary contribution, but its market access is significantly reduced in the service sector. Finally, the trade deal with Canada (CETA) is less extensive than Switzerland and is essentially restricted to just goods. Canada does not make a budgetary contribution.

According to their analysis Canada has (insofar) the most extensive association with the EU (more than Turkey) which doesn't provision for free movement. Any more extensive deal (Switzerland) had to agree with free movement of persons.

Since some may wonder (like me) what does CETA do to deserve a score above zero on the free movement axis... there are apparently some narrow improvements in some areas lessening some red tape in getting work permits... but the details seem quite... bureucratic, so that mostly law firms have commented on them... summary being that "mobility rights under CETA [are] very complex" in no small measure because "each country of the Union has issued reservations concerning mobility rights."

(+1) Note that freedom of movement for people is not only about visa requirements and the permission to stay in a country but also about other impediments to moving between countries. One aspect that CETA is supposed to address in the mutual recognition of qualifications (think in particular about regulated professions like lawyers, medical doctors, architects...)
– RelaxedJul 10 at 8:07